LONDON: Zinc prices rose on Wednesday to an 18-month high as a mine shutdown in South Africa and signs of tightening short term supply added to expectations of strong demand from top consumer China.
Benchmark zinc on the London Metal Exchange was up 1.5% at $2,729 a tonne at 1710 GMT after reaching $2,770, the highest since May 2019.
The metal used to galvanize steel has risen more than 60% from a low in March as industrial activity in China rebounded from coronavirus closures.
“There’s still room for Chinese metals demand to support prices and perhaps push them a little bit higher,” said Capital Economics analyst Kieran Clancy.
“But the scope for further rallies is really starting to look more limited,” he said, pointing to rising coronavirus cases in Europe and the United States and the likelihood that China will dial back stimulus measures next year.
Vedanta Zinc International suspended mining at its Gamsberg zinc mine in South Africa after a geotechnical failure trapped 10 employees. The mine produces 250,000 tonnes of zinc a year at full output.
The discount of cash zinc versus the three-month contract on the LME shrank as low as $3.30 a tonne, the least since June, from $14.50 on Monday, pointing to tighter nearby supply.
A pile-up of hidden zinc stocks in Spain has helped create shortages in top consumer China and bolstered a price rally.
Zinc inventories in LME-registered warehouses have climbed to around 220,000 tonnes from 50,000 tonnes in January, but one entity controls more than half.
Stocks in Shanghai Futures Exchange warehouses have trended lower in recent months and sit around 60,000 tonnes.
The global zinc market is expected to switch back to a surplus next year.
A union on strike at Chile’s Candelaria copper mine rejected a contract offer from the company on Tuesday.
Chile’s Codelco said it had reached advanced contract agreements with two small unions at its El Teniente mine.
The number of reported global daily deaths from the coronavirus reached a record high of 10,816 on Tuesday.
LME aluminium was up 1% at $1,997 a tonne after touching $2,000 for the first time since November 2018.
Copper was up 0.2% at $7,081, nickel fell 0.9% to $15,790, lead rose 0.6% to $1,952.50 and tin was 1.1% down at $18,820.—Reuters
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